It is no secret that Zero Hedge follows every utterance by Goldman Sachs (Morgan Stanley, not so much - it is sad just how irrelevant MS has become when it comes to swaying any opinion at all) as pertains to the firm's outlook on various commodities, simply because by the very nature of the firm's trading operations, whereby its prop desk (yes, Goldman's prop desk is alive and well) controls a substantial amount of the actual commodity outstanding (in either paper or physical form) and then advises clients to do the opposite of what the firm itself is doing. In essence: using its economy of scale (or monopoly, however one wishes to define it), Goldman can sway the market this way and that with one simple "client" note. The recent fiasco whereby Goldman downgraded Brent on April 12 only to upgrade it two days ago, using the very same assumptions, is nothing more than just the latest example of what we have claimed over and over is outright market manipulation. Today, we find we are not alone after Oppenheimer's Fadel Gheit accused the firm of precisely the same thing on Bloomberg TV: "Unfortunately, without repeating the names of the brokers, everybody
knows who the usual suspects are. These are the people in 2008 that were
making a bet on $200 oil. This is another form of market manipulation in my view. Whether or not they are influencing the market and manipulation could be
a stronger word, but they are influencing the market. They are doing
things that could be beneficial to them but harmful to the rest of us.
That is where government comes in and says stop, enough. You have a
Ferrari or a Maserati and can go 120 mph, but guess what? Those of us
who can only go 60 miles per hour will be pulverized. That is where the
government has to come in and say there is a speed limit here, but that
is not happening." Of course, if Oppenheimer was large enough and influential enough to do what Goldman does, we are 105% confident Fadel would be singing a totally different tune.

More courtesy of Bloomberg TV:

Gheit on Morgan Stanley and Goldman Sachs changing their positions on oil yesterday:

"Unfortunately, without repeating the names of the brokers, everybody knows who the usual suspects are. These are the people in 2008 that were making a bet on $200 oil."

"This is another form of market manipulation in my view. It is in another form of basically pushing the envelope. What you are saying or doing is not illegal, but they are allowed to do it. The government has a responsibility to slap them hard."

Gheit on whether he thinks the notes out of Morgan Stanley and Goldman Sachs are market manipulation:

"The interpretation will be left to the market. It is a self-fulfilling prophecy. They can invent reasons why oil prices go to $130 or $150, but history has shown that these people are able to move markets. It is not Exxon or BP or Shell that moves the oil markets. It is the financial players. It is the Goldman Sachs, the Morgan Stanley, all of the other guys. It is a shame on the government that allows them to get away with that."

"It is not illegal. All banks need to make a profit. The M&A business is not doing too well. Therefore, they need to improve their profit outlook and commodities has been the area where they make a lot of money. Commodity speculation is now a big driving force in Wall Street. Everybody wants to do it. It is not illegal, but it is not well-supervised. It is like speeding over the speed limit. If a cop doesn't stop you, you get away with it and you continue to do it. [The CFDC] has absolutely done nothing. They talked about this for three or four years. Nothing happens. Nothing changes and I think nothing will change. Any changes will be cosmetic because financial institutions have a lot of clout and the financial lobby is very strong. Much stronger than the oil lobby."

On whether he thinks Goldman Sachs is manipulating the price of oil:

"I am saying it is very easy to scream fire in a crowded place, everyone will run. All I am saying is that there has to be rules and the only way is to position them. You cannot allow a financial institution to take a huge chunk of the oil market and that's a pure speculation…Why did they control hundreds of millions of barrels of oil if they cannot refine or mine. Because it is because it is legal and they can get away with it. As long as they make a profit, that is fine. Basically, the consumer will pay the price. The economy will slow down because of the few that will make a huge amount of profits."

"All I can tell you is that when the big financial players, whether it is the buy side or the sell side, when Warren Buffet takes a position of Company X, the stock will move up. Whether or not they are influencing the market and manipulation could be a stronger word, but they are influencing the market. They are doing things that could be beneficial to them but harmful to the rest of us. That is where government comes in and says stop, enough. You have a Ferrari or a Maserati and can go 120 mph, but guess what? Those of us who can only go 60 miles per hour will be pulverized. That is where the government has to come in and say there is a speed limit here, but that is not happening."

On whether he is surprised at today's inventory figures:

"You have to take into account that we see these numbers don't mean much unless they are consistent. We have not seen a trend yet, but definitely higher gasoline prices at the pump will curtail driving. By how much, we do not know. Some companies say as much as a 5% drop from last month. We're entering the summer driving season so things could change. Gasoline prices are retreating, but obviously not by as much as they surged in the last four to five weeks. It is still in flux. We don't know exactly which way it will go. I can tell you one thing -- don't expect much lower gasoline prices, especially oil prices."On demand destruction and prices coming down over the next couple of months:

"Prices will come down and the next couple of months for a couple of reasons. Oil prices are down by almost15% from more than three weeks ago. That is not reflected fully in the price of gasoline. It will happen, but it is a question of when. The mitigating factor here is how strong it will be the driving season this time around. We are still very early. Next week compared to one year ago, we will see where we are. Right now, it is a balanced picture. There is demand destruction on one hand, but there is also the beginning of the heavy driving season."

That's like asking your right hand to amputate your left hand. Not going to happen when they both share the same brain and control system. It will take a third person or entity to amputate the gangrenous Goldman Sachs and company.

......is nothing more than just the latest example of what we have claimed over and over is outright market manipulation.....

Not so fast. ZeroHedge and its readers have routinely mocked the idea that speculators are to blame for the dramatic movements in commodity prices. WIth commodities, the theme here has always been the same: Bernanke's fault - and anyone who said otherwise was ridiculed. Now, suddenly, manipulation is to blame?

If we are now accepting the fact that speculators (GSCI) are to blame, does this mean ZeroHedge disagrees with Rick Santelli's claim that the 2008 oil run was NOT the result of manipulation and speculators? This article clearly pins the blame on GSCI, yet Santelli has repeatedly dismissed the role of speculators in the oil market, and their ability to jack prices away from true supply/demand equilibrium. According to CME's favorite talking head, contracts wouldn't continue to roll forward if the implied demand wasn't true. So who's right, Santelli or ZeroHedge?

I'm not quite sure why Santelli is so revered by ZeroHedge readers, especially since he's spent the past 30 years at the CME - the very same organization that hiked margin requirements 57 times this year on silver. Does anyone think that maybe, just perhaps, a 30 year career with the CME might distort one's credibility when discussing the role of speculators in the market?

"Of course, if Oppenheimer was large enough and influential enough to do what Goldman does, we are 105% confident Fidel would be singing a totally different tune."

Truth in jest. Remember money is the root of many of man's evils. Once a person is able to have a moment of clarity and realize that money is only a limited protection but meaningless without happiness... he can be free. As you said if the tables were turned he would sing another tune.....

"The original biblical quotation means "the love of money is the root of all evil" (or all kinds of evil), and has been translated into English as such since the King James Version.[1] However it has frequently been mistranslated as "money is the root of all evil", and the latter has become well-known misquotation."

I stand corrected then. You are correct... its the love of money that is the evil. And that love of money is in modern terms 'greed'... its game over for them. I am out early and all in gold/silver. I trade, invest or speculate no longer. I see no reason to get caught perpetuating this last ponzi called the global stock markets... a rigged casino...

You know, the thing is, NYMEX gets reports from both refineries and shipping terminals of prices paid. So the front month may be pushed around, but the price that someone pays for the actual liquid (spot) is real.

Bottom line: Those Saudis really stepped up and pumped more oil, didn't they? As in, no. You pretty much can't believe a single thing coming out of Aramco nowadays.

You have to take into account that we see these numbers don't mean much unless they are consistent. We have not seen a trend yet, but definitely higher gasoline prices at the pump will curtail driving. By how much, we do not know. Some companies say as much as a 5% drop from last month.

>>

Moron. GET YOUR MIND CALIBRATED. High price doesn't affect consumption of a zero elasticity item. People HAVE TO DRIVE TO LIVE. Demand destruction IS NOT DISCRETIONARY. There is no discretionary driving anymore. Demand destruction is JOB DESTRUCTION. People don't drive if they have no job. It's not a discretionary decision where someone casually says . . . oh, I guess we won't take that sunday drive in the country because gasoline is expensive. No! What happens is high price kills economic activity, the guy loses his job, and then he doesn't drive to work.

Discretionary burning of gasoline is what was squeezed out of habit patterns . . . certainly in 2008, but likely even before.

Do you hear about Sunday drives with the family anymore?

The point is the nuance of Demand Destruction must not be spun. They will try to spin it as "wasteful burning of gasoline ends" and that's crap. Demand Destruction is destruction of economic activity because all such comes from oil.

The econo-finance-moneyfromnothing folks hate to think in those terms because once that is recognized, that GDP comes from oil, then they realize they have no more power.

Bernanke can print what he wants, people can bid Gold or Silver up or down, the ECB can bailout whatever they like, but in the end it is oil that powers the tractors that plant the crops in the necessary quantities to feed 7 billion people. When it stops doing that, holders of printed money, holders of gold, holders of bailouts . . . they all starve.

on that note, i'm surprised we haven't seen more money flow into lifestyle substitutes for oil - transit oriented development, for instance, makes a lot more sense when no one can afford to drive anywhere, but i haven't heard or seen a spike in development, despite a huge market of renters and lower than ever construction labor costs. i'm sure part of this has to do with the government and the banks not wanting to finance the creation of a superior product to compete with the millions of underwater mortgages they already have on their books, but i feel like at least one bank would recognize the long-term shittiness of an investment in remote, exurban, subdivisioned single family houses in a world of rising oil prices, especially compared to medium and high-density centrally-located housing, and knows that they could at least go a long way to destroying their competitors balance sheets by offering their underwater tenants somewhere better to live. that there isn't tells me either that the banks expect oil prices to decline dramatically in the future (maybe), have colluded and agreed to not do anything that might threaten one another's residential mortgage portfolios (not a Nash equilibrium solution,) or know that investing in urban cores might save cities from bankruptcy and thereby deny the banks the opportunity to screw the cities on unnecessary bond issuances or the opportunity to steal valuable public assets at fire sale prices.

"So people have to drive to work and no idiot in Washington planned for local economies without oil!"
---
Excellent point. In the future we may well become an agrarian society again, where most people do not live in cities and grow their own food.

Are we planning for this? No. But can we do it? Certainly. We'll be forced to or perish.

Please allow me to correct you - Fadel Gheit has been utterly wrong on oil for a minimum of 15 years, if not longer. Why he is an 'oil analyst' only the shadow knows. One would have been short WTIC since it first crossed above $15 if one had listened to him.

Proprietary trading should not have any place (as in zero investment in any form) in Investment Banking... that's the only answer, but of course they get much of their income from it, so they would destroy anyone that even suggested it.

WASHINGTON — When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices.

Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008,

"Saudi Arabia can't just put crude out on the market," the cable quotes Naimi as saying. Instead, Naimi suggested, "speculators bore significant responsibility for the sharp increase in oil prices in the last few years," according to the cable.

What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.

The Obama administration, the Bush administration before it and Congress have been slow to take steps to rein in speculators. On Tuesday, the Commodity Futures Trading Commission, a U.S. regulatory agency, charged a group of financial firms with manipulating the price of oil in 2008. But the commission hasn't enacted a proposal to limit the percentage of oil contracts a financial company can hold, while Congress remains focused primarily on big oil companies, threatening in hearings last week to eliminate their tax breaks because of the $38 billion in first-quarter profits the top six U.S. companies earned.

The Saudis, however, have struck a steady theme for years that something should be done to curb the influence of banks and hedge funds that are speculating on the price of oil, according to diplomatic cables made available to McClatchy by the WikiLeaks website

The Saudi oil minister naturally would prefer it if the only entity capable of moving the price of oil were the oil cartel led by - Saudi Arabia! The fact that the Saudi oil minister has a disdain for freely traded markets should not surprise anyone.

A three year old could look at the graphs on oil inventory broken down by PADDs and then distillates and then gasoline and see this market is manipulated. Crude inventories are massive, especially the largest tank farm in PADD II - we are swimming in oil. But is is obviously being with held from refining to gas and other products as you look at the PADD for gas. Furthermore oil is being withheld from NE and Central PADDs and instead put into storage despite the immediate loss to do so. Capacity with refiners is in some places in the 70% - and this when gas is over $4.00 at the pump?

This Oppenheimer spiel is weak and silly, saying the comments/analysis is manipulations. Reminds me of the goofy stuff folks said about Kaufman in the 80s at Sali. But, I do know the oil market is now organized in ways that would gobsmack E. Craig in his heyday during the long bond auctions and makes Mozer look like a saint.

And to be clear, I suspect it is all perfectly legal based on the changes Goldman et al got the CFTC to make long ago. ICE acts in the same way as the euro dollars did with "petro dollars" in the 70s - moves it off shore and away form prying eyes.

Where the real damage will be done when this corner ends - and it will with oil blowing past 40 to 18(?) as insult to over bidding - and as it crushes China and others and likely every major college endowment in the USA, not to mention some dopey pension plans who never bothered to think out whether or not their benefits were paid out in oil or US $ - the real damage will be all the false price signals in a Hayek sense for now almost 6 years.

..oh another interesting point and to show how bad this corner is getting. To the those who keep babbling the mantra "the USA is the largest oil importer" donja know? Will that is sorta true but the bizarre fact is the USA is now a net exporter of crude and oil products.

On the yahoo market ticker this morning I read an article about the manipulation. (they changed the wording in the whole article now)But, it said that "these traders are taking these huge positions in the physical market with no intention of taking delivery of it".

ROTFLMAO !

Then I thought to myself, what about every other commodity on the planet ?

But will give you a few clues - USA is running out of storage or is now out of storage. Ever notice the pricing for oil tankers - now majority is on "go slow" to the USA a marine PADD II if you will.

Not only that but I am pretty sure that crude speed of flow in pipelines is at about 1/4 the full capacity speed - who makes that decision I wonder? Do a little calculations on miles of pipelines and assuming most about 6 feet in diameter figure out the "storage" when the pipeline is slowed 50%. I think it is length times II r ^2 . So 3000 miles of pipeline is about 85MM barrels of crude in transit so slowing the pipelines by 50% provides storage of about 40MM barrels - this provides an expansion of almost 50% to PADD II.

But that amount is dwarfed with the speed of the approximately 380MM barrels shipped ot the USA per annum via tankers - if that slows by, say, 10%, that increases storage by about 100 MM barrels.

If you are in NYC and can see the harbor can see up to 10 tankers riding at anchor fully loaded - thats about 15 MM barrels storage right there. I sue to be able to predict oil prices in the late 80s by looking at the harbor and then one morning they would all be gone and that day or next oil would drop 5% to 10%.

So not only the PADD II chart is huge over load in oil - where the hell are they keeping it all - but there is a 2X PADD in storage in go slow tankers and pipelines.

2004 Brent traded at $40, DXY was about 90. Since 2005, net oil exports are down ~10%. From the IMF oil demand inelasticity -0.06 to -0.07, i.e. 1% decrease leads to a 16% increase in price. I get Brent between $105-125....

Blame your free market, the crude oil is captive to system by the nature of the WTI delivery mechanism, but once refined, you pay prevailing world market prices. (I am allowed to sell my diesel and gas to anyone aren't I?)

Thats the point. I find it ridiculous to use elasticities from some Econ 101 and further more we have a completely different conversation to chat about dollar and mercantalism. But, China's scramble to hoard commodities - they have to as they inport so much - so as to alleviate their trade numbers and also to find some non dollar hedge to sovereign accounts - thats another corner and manipulation that has a ven set overlap on the oil markets but a different topic. Thats makes use of elasticities even more ridiculous and risible.

Sorry, you wanted fundamentals, so I gave you net oil exports, i.e. the amount of oil that is on the market, I give you supply and demand inelasticities, and I give you the currency in which the product is traded. If that is not fundamentals what the fuck is?

BTW, could you respond my comment to your comment about the US being a net exporter.. I would really like to see that....

Basically the entire conspriracy will just go "poof" overnight if all commodity trading results by tax exempts (endowments and pensions) has UBTI applied, all financial users (abusers) of commodity futures be returned to speculator status and lose their hedge status, and the GSCI is collapsed, perhaps banning it even for derivatives or product use - beats me how - and all US tax exempts must become transparent in all commodity positions and trading with a report filed monthly, whether if they trade direct or via third parties such as hedge funds.

If that is done the squash court loses one wall and no longer can they play the corner shot.

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